Waiting for reforms: On the economic stimuli
The stimulus incentives hold promise, but structural reforms are nowhere on the horizon
People who have been yearning for major economic reforms from the Narendra Modi government, it seems, will have to wait to have their dreams come true. Finance Minister Nirmala Sitharaman on Saturday presented the third round of stimulus measures to resuscitate the struggling economy, but once again these have largely failed to live up to the initial hype around them. The previous two rounds of the stimulus plan, presented at press conferences held by the Minister over the last few weeks, focused primarily on reviving the automobile sector, boosting the confidence of foreign investors who were spooked by the Budget announcements in July, and improving the health of dangerously fragile state-owned banks by doing everything short of privatising them. This time around the focus has been on helping out the underperforming export and real estate sectors through piecemeal fiscal reforms. Among other things, Ms. Sitharaman announced a new tax refund scheme and greater priority sector lending for the export sector to incentivise exports. It is expected that the new tax breaks to the exports sector will cause a dent of up to ?50,000 crore to the government’s revenue. Further, external commercial borrowing norms have been eased to make it easier for Indian real estate companies to tap funds from abroad, and funds worth ?10,000 crore have also been allocated to aid the completion of affordable housing projects. With lack of demand and major supply-side bottlenecks being the primary issues facing exports and real estate, it is doubtful whether the present measures will be enough to revive these flailing sectors.
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